The Rs 2,200-crore Videocon group has finalised a business strategy, in order to face strong international competition and possible difficult market conditions.
The strategy involves incurring a Rs 1,020-crore capital expenditure over the next 10 years for building additional manufacturing capacities.
The company is looking at a domestic turnover of Rs 8,375 crore and an export turnover of another Rs 300 crore by the year 2007. Videocon is looking at a net profit after interest, depreciation and tax of Rs 300 crore by that time. Its current turnover is Rs 2,200 crore and net profit, Rs 150 crore.
The group also proposes to launch its products in Indonesia, Vietnam, Middle East, South Africa and Italy with back up manufacturing capacities in those countries. These markets have been chosen as their demographic profiles are similar to that of India.
Videocon aims to expand its domestic manufacturing capacities to attain global economies of scale. It is also looking at strategic acquisitions, wherever possible.
The group has factories at Aurangabad (CTV, B&W TVs, washing machines, refrigerators, air conditioners, VCR\VCPs), Ahmednagar (audio products), Gandhinagar (picture tubes and assembly) and Bharuch (glass shells for picture tubes). It also has assembly units at Noida, Bhopal, Bangalore and Hosur.
As per the business strategy, the group proposes to fund its capex as far possible out of long-term debts from global debt\capital markets. Videocon intends to get the various group companies rated by US and Japanese agencies so as to enable them to access their long-term debt markets.
Besides, it also plans to get its accounts recast continuously on US\Japanese GAAP by one of the six global firm of accountants annually and carry out the exercise of `Mark to Market of all the assets of the group companies at least once in a block of three years by one of these firms.
The group proposes to locate its expansions in strategic places so as to continue to get the fiscal incentive of the state and central governments.
To reinforce its product image, the company intends to spend Rs 140 crore annually on brand promotion. Videocon plans to develop its Italian outfit for servicing the European Community markets.
Videocon is also taking various steps to maintain its market share. It proposes to spend 0.5 per cent of its turnover annually on research & development (R&D) expenditure.
The group wants to concentrate on maintaining its market share even at the cost of a portion of incremental bottomline. Besides, it also plans to keep working capital utilisation under control and grow apace with the market.
The manufacturing facilities at present on the anvil are the ones in Pavio (Italy), Vietnam and Hasan, for IT products. Apart from its prime business of consumer electronics, Videocon has also entered core sectors like power, petrochemicals, oil & gas, real estate and mining.
In each of these ventures, it proposes to use separate corporate identities, take on global players as sizeable equity partners and leave EPC operations & maintenance to them. The diversifications are likely to yield a turnover of Rs 7,000 crore by 2007.
In the domestic consumer products business, the company is a major player in CTV, B&W TVs, washing machine, audio products, VCR\VCP, air conditioners, refrigerators and kitchen appliances segments.
